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1. Explain how and to extent the concept of consumer surplus is a psychological phenomenon? 2....

1. Explain how and to extent the concept of consumer surplus is a psychological phenomenon?
2. What commodity is bought and sold based on the classical model of supply and demand?

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Answer #1

1 consumer surplus is psychological phenomenon in the sense that it depends upon one's mind. It varies from person to person. People perceive the benefits of goods vis a vis their cost differently. Some see more benefits and others less benefits from a good. It's mostly psychological phenomenon. But there is some scientific basis for it also. E. G water is necessary for life So definetly we enjoy some consumer surplus of it is free or cheaply available

2 The commodity is bought and sold which provides some utility and is limited in quantity. Otherwise it will be free or useless.

The amount traded is equal to the quantity where supply and demand meet. In other words where cost=benefit

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